NATHAN NEWMAN

Public Policy is the
Scandal

Forget about seeing Ken Lay in an orange
prison jumpsuit. However pleasurable it will be to see the ranks of
corporate and (hopefully) government officials in jail for their
crimes in assisting the looting of Enron investors and workers'
pensions, that is only the tip of the iceberg.

The real Enron scandals are the public
policies that let it happen and which made most of Enron's actions
perfectly legal, policies used everyday by almost every other large
multinational. If anything good is coming out of the scandal, it is
the daily education on these misguided policies and a chance to
organize to stop Bush from furthering the rightwing corporate agenda
that made Enron possible.

Bush may not be impeached over the scandal,
but his policies should be. Enron shows the fundamental flaws in
pro-corporate polices promoting social security privatization,
corporate tax breaks, tort "reform" and bankruptcy changes he has
been trying to pass.

Social Security Privatization: The
looting of Enron pensions to benefit insider investors shows the
fundamental idiocy of proposals to create the possibility that
retirees could end up with nothing in their retirement. With Enron's
failure, 15,000 employees lost $1.3 billion out of their 401(k)
savings; the saving grace is that they will still qualify for the
guaranteed monthly Social Security check when they retire.

It is bad enough that companies have been
using 401(k) plans as a substitute for company-funded pension funds
across the country -- the percentage of workers with pensions
guaranteeing monthly payments has dropped to just 7% nationwide.
Enron shows the dangers of allowing the corporate stock manipulators
to get their hands on the trillions of dollars in the social security
trust fund. The story of Enron employees having their 401(k) assets
frozen in increasingly worthless Enron stock, even as insiders at the
company cashed out over $1 billion in stock, is just a miniature of
the whole stock bubble. In the broader economy, an estimated $4
trillion in investment value melted away in the year after the stock
market peaked in 2000, often with insiders cashing out at the expense
of smaller investers. Michael Perkins, a founding editor of the
Internet business magazine Red Herring, flatly declared that
the "high-tech financial bubble represented the greatest-ever legal
transfer of wealth -- from retail investors to insiders." Small
investors had traded in investments in their community for the
ephemeral promise of this new global Internet El Dorado.

The lessons of Enron should make Americans
less likely to make the catastrophic mistake of entrusting trillions
of dollars of the Social Security trust fund to the stock market
manipulators.

Corporate law and tax havens: The
minute the word of 700 Enron "Cayman Island subsidiaries" hit the
news, people had a pretty good idea that the story could only get
worse. Hand-in-hand with stock manipulation is the global corporate
shell game of international subsidiaries and tax havens allowing
companies to manipulate their books to deceive investors and cheat on
taxes. Because it allows firms to hide profits in tax-free accounts,
the tiny Cayman Islands have 530 commercial banks with assets of more
than $800 billion, equivalent to about a fifth of all US deposits
nationwide.

As Manhattan District Attorney Robert
Morgenthau testified in Congress last summer even before the Enron
scandal unfolded, the money is not down in the Cayman Islands
"because of the sunshine and the beaches. To be blunt, it is there
because those who put it there want a free ride -- depositors,
investors, banks and businessmen want to avoid or evade laws,
regulations and taxes in their home countries." It is estimated that
US corporations manage to evade over $20 billion a year in corporate
taxes owed to the US government through these manipulations, allowing
companies like Enron to avoid paying any corporate taxes in most
years.

The Bush administration has been opposing
legislation to crack down on these off-shore tax havens, but there
now may be a chance in Congress to override that opposition and
finally force these companies to pay the taxes they owe -- which
would be a nice change from Bush's tax cut handouts to his corporate
backers like Enron.

Tort Reform: The heroes of the Enron
story will likely be the much abused trial lawyers, often denounced
by Bush as he's defended the wonders of leaving corporations
unmolested by pesky accountability to investors or their workers.
It's the trial lawyers who will have to try to figure out how to make
the insider executives and auditors, who looted Enron for their own
private profit, cough up the cash to pay back some of the losses
suffered by Enron investors and employees. Unfortunately, because of
laws passed in the last few years, their jobs will be a lot
tougher.

Back in 1995, a top priority of Gingrich's
Contract on America was passing corporate-backed limits on investor
accountability. Backed by big companies and auditing firms,
legislation passed that year shielded executives from liability from
making wild promises about financial performance of their firms. It
also weakened the liability of auditors and accountants for their
participation in dubious market projections. This all helped feed
insider speculation and self-interested financial projections that
fed the stock bubble in the end of the decade.

Unfortunately, one of the central figures in
passing the 1995 law was the top lawyer-lobbyist for the accounting
industry, Harvey Pitt, who Bush last year appointed to be the head of
the Securities and Exchange Commission (SEC), supposedly the watchdog
over the industry. The real crime in the Enron debacle is that those
who made the company's crimes possible are the ones supposedly
writing policy to prevent repeat disasters.

Bankruptcy: Even if Enron executives
are sued, they may be able to take advantage of manipulations of the
bankruptcy code available to rich defendants in places like Texas,
where someone like Ken Lay can convert his assets into a 100-acre
estate, declare bankruptcy and live in the lap of luxury while
stiffing those whose lives he destroyed. A proposed bankruptcy bill
backed by the Bush administration would stiffen the pressure on poor
creditors facing bankruptcy, but the GOP-led House and White House
have fought heartily to preserve the so-called "homestead" exemption
for rich bankruptees. Corporate bankruptcy has often been a tool over
the years for rich investors to loot companies and stiff the
employees left with bankrupt pensions; Enron is just continuing a
long tradition.

Some see Enron as another scandal to look
for a "smoking gun" to impeach a president. But that is too limited a
goal, as all such personalistic political battles tend to be. The
smoking gun is in plain view. It's the pro-corporate policies of
deregulation and speculation that have devastated tens of thousands
of lives at Enron and millions more in the US and around the world.
We don't need to impeach a person; we need to impeach and remove
those policies.

Nathan Newman is a longtime union and
community activist, a national vice president of the National Lawyers
Guild and author of the forthcoming book Net
Loss on Internet policy and economic inequality. Email
nathan@newman.org or see www.nathannewman.org.